Vocus Group Ltd [ASX:VOC] jumped as much as 20.6% this morning, to $3.45 per share.
The company announced they had received a cash bid. The bidder, Kohlberg Kravis Roberts & Co. (KKR), wants to buy 100% of Vocus for $3.50 per share.
The offer is subject to a number of conditions, including due diligence, available financing, and unanimous recommendation from Vocus’ board.
Why has KKR swooped in now to buy Vocus?
The company is beaten down. On 16 May, Vocus reached a low of $2.35 per share. It was 75% below what the stock was trading at in May 2016. Clearly, KKR sees Vocus as a great investment at their current price.
What now for the Vocus Share Price?
As reported by The Australian Financial Review:
‘Considering that share price range, the KKR pitch, revealed by The Australian Financial Review’s Street Talk team on Tuesday night, does look like a low-ball grab at a company that has plenty of potential, but that grew too much, too fast.
‘In the space of 18 months, Vocus completed a $1.2 billion merger with Amcom, and then a $3.8 billion merger with M2 Group and is now battling some serious digestion problems. If those growing pains can be cured, then KKR could be getting a bargain.’
It’s unlikely the board will agree to sell the business at $3.50 per share. Just a year ago, the stock was trading around $9.40.
If you’re a Vocus shareholder, don’t hold your breath. As the AFR stated, the company grew too fast. But they still have plenty of potential.
Vocus did revise profits for FY17 down. However, investors could be placing too much emphasis on the short term. For long-term
Junior Analyst, Money Morning
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